From The Jakarta Post

Protests will not affect foreign investments

A series of violent protests targeting American companies operating in Indonesia has recently raised concern about security for foreign investment. James Castle, president of the American Chamber of Commerce in Indonesia, talked to The Jakarta Post's Anissa S. Febrina on the impact of the unrest on the investment climate here.

Question: Many say protests in mining areas hurt the investment climate here. Will the impact be really significant and what lessons can be learned from them?

Physical disturbances and demonstrations are never good for business, so they do have a negative impact. Having said that, everywhere in the world natural resource investments are controversial. People in the mining industry see this as a concern and they appreciate the response of the Indonesian government, which has confirmed its support for these investments and sees the benefits. In the last five years or so, mining investment here has been very low because there was a doubt that the government supported mining industries.

Now, it is quite clear that the government does support them, so the impact of the demonstrations might be the opposite. It encourages the government to be very clear about what it wants and what it will support. Now, if you go beyond the mining and the natural resource sector, I think the impact is minimal because businesspeople around the world know that the sector attracts more attention.

They also tend to be in remote areas almost by definition. I don't think that it would have too much of an impact after all. They're very small, very few people, and the government has been very clear that it doesn't have any patience for these kinds of activities, so the result would be minimum.

What do you think is the root of the problem and the bigger picture here?

There are several things happening here. Historically, the sharing in resources has not been fair for local people. In the U.S., if you were born on top of a gold mine, you become very rich, very fast. But in Indonesia, the philosophy is that it belongs to the state and not to the people. So, here, if you were born on top of a gold mine, you can actually be unlucky because you would get moved away and so on. History is on the side of the people who are complaining.

But, as a foreign investor, you can only follow the laws of the country. If the law says you pay to the central government, that's where you have to pay. I think, it really highlights the need for more transparent communications between the local and central government to work on these issues.

We all know that Papua has a political problem as well, so I think people are taking advantage of the mining situation to make a political agenda. In my view, the extreme violence, which was not in the areas of the mine is very much related to political problems. And the mine is just an excuse for those people. That is my personal opinion.

The government has to examine its own position vis vis the people of Papua. Has the government been fair? Have they been transparent? The implications are more important for the Indonesian government than they are for the miners. And I think everybody learns a lesson on all sides. Obviously, companies have to always look for ways they can do things better and be better corporate citizens. And governments also have to examine themselves.

And sometimes you have political elements who are not going to be happy anyway. So, you are going have to deal with those from more of a security situation and hope you create a social condition where troublemakers do not get any local support.

Everybody seems to suspect there had been an unfair negotiation. How far do you think these companies will allow reviews of the contracts?

I cannot really speak for the companies. It is more that they will look at what they have been doing and see if they can make a greater contribution.

The immediate cause in Freeport was what to do with their tailings and waste products. That is nothing to do with the contract and can be negotiated and settled. Local and central governments should help.

The people complaining are not really people who live in the area and work with Freeport. They are people who live elsewhere. They're just complaining, some don't like foreigners, some don't like mining. It doesn't matter how much you give, it will never be enough. Those kind of people actually hurt their position because they don't really have a legitimate position. They are just against something.

The issues with the local governments are really not that big and very solvable within the current contract.

The U.S. has a Foreign Corruption Practices Act for its companies. When it comes to environmental problems, is there a similar regulation?

Environmental laws tend to be local. There are national and local ones. The locals tend to be more strict. Indonesia's standards are relatively strict. But, what we have seen for mining companies, in some companies where they have weak standards, the mining companies had been criticized in their home countries for misbehaving overseas. And you see that on the stock exchange, you see their price affected. So most American companies, the major ones, they follow the international standards. They are checked not just by local, but also international environmental experts. Today's world is too transparent, you can't behave badly in one place and expect it not to be revealed to the world.
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